UPDATE 3-McDonald’s May sales up, sees euro drag on profit

* Global same-store sales up 4.8 pct

* U.S. up 3.4 pct, Europe up 5.7 pct

* Sees euro, other currencies, hurting full-year profit

* Shares up slightly in late morning trade
(Adds analyst and company comments, bylines, share move)

By Lisa Baertlein and Ben Klayman

LOS ANGELES/DETROIT, June 8 (BestGrowthStock) – McDonald’s Corp
(MCD.N: ) reported a stronger-than-expected 4.8 percent rise in
worldwide May sales at established restaurants, but said it
expects a weak euro to take a bite out of full-year profits.

Roughly a quarter of McDonald’s consolidated operating
income originates in countries that use the euro currency, the
world’s biggest hamburger chain said on Tuesday.

Based on current exchange rates, McDonald’s expects
currency conversion to hurt full-year net income per share,
versus its previous expectation for a slight benefit. The
company, which gets more than half of its revenue and profits
from outside the United States, gave no further details.

On Tuesday, the euro hovered near a four-year low against
the dollar on concerns over a widening European debt crisis
that has struck financial markets and could constrict consumer
demand. [ID:nN08196317]

The currency fluctuations have been “wild and crazy” since
McDonald’s last gave currency guidance in April, Edward Jones
analyst Jack Russo said.

He said the risks now are two-fold: Possible austerity
measures around Europe could put a dent in consumer spending,
and the strong U.S. dollar hurts reported earnings and sales.

McDonald’s rival Burger King Holdings Inc (BKC.N: ) on Monday
said unfavorable exchange rates, primarily tied to the euro,
would cut earnings for the current quarter 1 to 2 cents a
share. [ID:nSGE6560GT]

However, McDonald’s does not expect the weak euro will hurt
results for its second quarter, which will end June 30. May
sales at McDonald’s restaurants open at least 13 months rose
3.4 percent in the United States and 5.7 percent in Europe.

Analysts, on average, had called for a 4 percent overall
rise in May same-store sales, fueled by a 4.3 percent gain in
the United States, and a 3.4 percent rise in Europe.

MCCAFE BOOST

While U.S. growth fell short of analysts’ view, it outpaced
results from other fast-food chains and was powered by the
expansion of McCafe drinks and the popularity of products
associated with the launch of the movie “Shrek Forever After.”

“McDonald’s, of the top seven burger brands in the country,
is the only one reporting meaningfully positive same-store
sales,” said Janney Montgomery Scott analyst Mark Kalinowski.

Last week, McDonald’s recalled at least 13.4 million
“Shrek”-themed drinking glasses in the United States and Canada
due to the presence of the toxic metal cadmium in the designs.
[ID:nN04133649] The company is now offering $3 refunds to
customers who bought the recalled glasses.

Sales growth in Europe was driven by France, Germany,
Britain and Russia. Europe contributed 41 percent of McDonald’s
overall revenue last year — more than any other region — and
business there has benefited from longer operating hours and
restaurant renovations.

Bane Knezevic, head of McDonald’s Germany, told Reuters
that consumer sentiment in Europe’s economic powerhouse has
picked up after a harsh winter and economic slump. But the
German government’s plans to cut spending and rein in deficits
could dampen sentiment.

“It is still a bit early to say how consumers will react,”
Knezevic said. While he expects some negative effect in the
months ahead, he said, “it won’t be big.”

Shares in McDonald’s rose 0.6 percent to $67.17 in late
morning trading. Burger King, which counts Germany as its
largest international market, saw its shares fall 0.1 percent.

CHINA SHINES

May same-store sales rose 3.8 percent in the Asia/Pacific,
Middle East and Africa (APMEA) region due to strength in
Australia and China, better than the 3.1 percent increase
analysts had expected.

McDonald’s had nearly 8,500 restaurants of its 32,500
global restaurants in that APMEA region, which contributed
nearly 20 percent of its revenue in 2009. Australia, China and
Japan accounted for more than 50 percent of APMEA’s revenue.

The Golden Arches, as the company is known, plans to double
its China network to more than 2,000 outlets by 2013.

Yum Brands Inc (YUM.N: ) has more than 3,500 restaurants in
China, a bigger presence than any other U.S. operator. Shares
in Yum were up 1.0 percent.

Year-to-date through Monday, McDonald’s shares were up 7
percent, compared with a 3 percent fall in Burger King shares
and a gain of almost 14 percent in Yum stock.

Stock Market Analysis

(Reporting by Ben Klayman in Detroit, Lisa Baertlein in Los
Angeles and Christian Kraemer in Munich; editing by Michele
Gershberg and Gerald E. McCormick)

UPDATE 3-McDonald’s May sales up, sees euro drag on profit